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Guest post - When it comes to fraudulent joinder in Texas, let’s hail the glory daze and just keep winning

Here's another guest post by Reed Smith's own Kevin Hara, this time about a recent Texas case holding that health care providers involved in clinical trials are still protected by a state medical malpractice statute, and thus were fraudulently joined. While we are of two minds about such statutes (making it harder to sue HCPs increases litigation against our clients), since HCPs are our clients' clients, and thus the heart of their businesses - and we're defense lawyers by temperment - in the end we come out in favor of less liability generally. This is an interesting use of fraudulent joinder that could well apply to the definition of "health care provider" under similar statutes in other states.

As always, our guest posters deserve all the credit and any blame for the contents of their posts.

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When it comes to Texas, one might never know based on its jurisprudence that the state motto, and indeed the state’s moniker, is derived from “Tejas,” a Native American term for Friendship. At least from a defense perspective, the Lone Star State at times seemed mighty inhospitable; after all, Texas invented that awful “heeding presumption” back in 1972, touching off a Reign of Fire, as states followed suit, adopting a variety of feeding presumptions. It also allowed personal injury recovery under its consumer protection statute, made a big deal of Restatement Second §402B, and was the last of the large states to adopt the learned intermediary rule. While we’re at it, let’s not forget the decision that would never die, the Murthy case, making the worst decisions list in consecutive years in 2011 and 2012, giving us not just one opinion to lament, but Two for the Money.

But we’re forgiving, and won’t “mess with Texas” too much. Although it took until 2012, with some help from Bexis, for the Texas Supreme Court to finally adopt the learned intermediary doctrine, deciding that it was A Time to Kill an awful decision from 2010 whose name should have been Mud. Texas adopted the Third Restatement, which should kill the heeding presumption, and even if it doesn’t, that presumption now excludes prescription drugs and medical devices, at least forcing it into Submission. The Legislature amended the DTPA to eliminate personal injury damages, and we haven’t heard a peep from §402B in a while, and this section’s Failure To Launch into widespread acceptance is a good thing. Texas Daubert decisions have been outstanding. Not only that, a lot of excellent Reed Smith practitioners are based in our Houston office.

Texas has other positive attributes as well, including being the birthplace and home of Matthew McConaughey, and of baseball standout Nolan Ryan, who we believe, despite numerous accolades, remains underrated because of his somewhat pedestrian won loss record (which for pitchers reveals more about the team and much less about the individual). Seriously, seven no-hitters? Ryan pitched in an era where starters routinely went the distance, and they were their own closers; we urge you to check out his career innings pitched, hits allowed, complete games, and well, the strikeouts speak for themselves. No disrespect to Madison Bumgarner, who was otherworldly in the 2014 World Series, but who has 6 complete games in his career. Ryan had an incredible 222, including several years where he had more than 20. We realize that people smarter and more knowledgeable than we are will correctly we might add, mention that Ryan also walked many hitters and never won the Cy Young. That’s the beauty of sports.

But we digress. Back to the legal issues. It would be remiss not to note that Texas also has some very favorable statutes, including Civil Practice and Remedies Code 82.007, which provides a rebuttable presumption of nonliability for manufacturers and prescribers in pharmaceutical product liability actions involving failure to warn for FDA approved warnings, and 82.008, which provides a presumption of nonliability for compliance with government standards. See Tex. Civ. Prac. & Rem. Code §§ 82.007(a)(1) and 82.008. We were concerned that a recent Southern District of Texas decision would a la Murthy, run roughshod over state law like the TCU Horned Frogs in an 82-27 rout of Texas Tech this year or UCLA in a 66-3 drubbing of Texas in 1997 (the Longhorns’ worst loss ever). Fortunately, we were pleasantly surprised.

We would like to trumpet the court’s recent decision in Rodriguez v. Gilead Sciences, Inc., which is a big reason we cited the horrendous Murthy opinion from a couple years ago, in a case involving clinical trials that left us Dazed and Confused. InRodriguez, Plaintiff brought an action for permanent heart damage he allegedly suffered as a participant in a clinical trial for treating hepatitis C with a drug called Sofosbuvir/Ledipasvir (“S/L”). 2014 WL 5782437 at *1 (S.D. Tex. November 6, 2014). Id. at *1. Plaintiff, a Texas resident, sued the manufacturer Gilead, his Texas physician, and the Texas Liver Institute (“TLI”), the study center. Id. Gilead, a California citizen (our beloved home, but a state routinely listed as a “judicial hellhole”), removed the case to federal court, asserting that the local physicians and medical facility were fraudulently joined because healthcare liability, which plaintiff purported to disclaim in his complaint, was only basis for liability against the non-diverse defendants. Id. Plaintiff moved to remand, arguing that fraudulent joinder did not apply, and the court noted that a party is fraudulently joined if there is “(1) actual fraud in the pleading of jurisdictional facts; or (2) the inability of the plaintiff to establish a cause of action against the non-diverse defendant in state court.” Id.. Put another way, fraudulent joinder exists when “there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the non-diverse defendant in state court.” Id.

In Texas, claims against medical and healthcare providers are expressly governed by the Texas Medical Liability Act (“TMLA”), which provides that healthcare claims include any:

cause of action against a health care provider or physician for treatment, lack of treatment, or other claimed departure from accepted standards of medical care, or health care, or safety or professional or administrative services directly related to health care, which proximately results in injury to or death of a claimant, whether the claimant's claim or cause of action sounds in tort or contract.

Id. at *2; See Tex. Civ. Prac. & Rem. Code § 74.001(a)(13). Attempting an end run around the TMLA, Plaintiff argued that when his physician recruited him for the clinical trial, “he did so only in his capacity as a businessman and agent of Gilead and not as [plaintiff’s] physician, thus triggering negligence and product liability claims.” Id. The plaintiff maintained that the claims were not subject to the TMLA because the clinical study was “not a process for determining the health risks and benefits of S/L but, instead, was a formality . . . to obtain FDA approval for a product.” Id. Ignoring the fact that his physician – clearly making a healthcare decision – attempted to treat him with the S/L, Plaintiff tried to two step around the TMLA by alleging “he [was] not relying on any doctor-patient relationship or the exercise of any medical standard of care.” Id.

Hold on to your cowboy boots. The court wisely declined the invitation to dance, and ruled that the plaintiff's claims were controlled by the TMLA, as determined from “the facts at issue, not the theory pled.” Id. The court found that “[plaintiff] suffered from a medical illness, HCV, and sought treatment from . . . a physician, and TLI, a health care institution” which “constitute[d] ‘health care provider[s] under the TMLA.” Id. at *3. The physician and clinical study were “responsible for administering that treatment and monitoring [plaintiff’s] medical condition,” which related to healthcare, as defined by the TMLA. Id. Thankfully, recognizing the Frailty of plaintiff’s argument, the court held that the “TMLA govern[ed] all of [plaintiff's] claims, regardless of the legal theory he [sought] to impose on them.” Id. Therefore, the court found that the non-diverse defendants were fraudulently joined and denied remand because plaintiff disclaimed the TMLA, the only basis for liability under state law. Id. That sounds like a swing and a miss, no Contact, strike three, and it was game over for plaintiff’s claims. As any life sciences defense attorney knows, establishing fraudulent joinder is no easy task, and that makes this decision tastier than Texas barbecue, to which we say, “Alright, Alright, Alright!” From Deep in the Heart of Texas, one does not have to be a True Detective to find that this decision is truly InterStellar.

Compare jurisdictions:Arbitration

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